Chuy’s Holdings, Inc. Announces Second Quarter 2021 Financial Results

Revenue increased 64.7% to $108.2 million compared to $65.7 million in the second quarter of 2020. Comparable restaurant sales increased 60.0% as compared to fiscal 2020 and decreased approximately 1.4% as compared to fiscal 2019.

Chuy’s Holdings, Inc. (NASDAQ:CHUY) last week announced financial results for the second quarter ended June 27, 2021.

Highlights for the second quarter ended June 27, 2021 were as follows:

  • Revenue increased 64.7% to $108.2 million compared to $65.7 million in the second quarter of 2020.
  • Comparable restaurant sales increased 60.0% as compared to fiscal 2020 and decreased approximately 1.4% as compared to fiscal 2019.
  • Net income increased 156% to $11.5 million, or $0.57 per diluted share, compared to net income of $4.5 million, or $0.26 per diluted share, in the second quarter of 2020.
  • Adjusted net income(1) increased 215% to $12.6 million, or $0.62 per diluted share, compared to $4.0 million, or $0.23 per diluted share, in the second quarter of 2020.
  • Restaurant-level operating profit(1) increased 87% to $27.6 million compared to $14.8 million in the second quarter of 2020. Restaurant-level operating margin(1) increased 310 basis points to 25.6% compared to 22.5% in the second quarter of 2020.
  • $113.5 million in cash and cash equivalents, no debt and $25.0 million available under the revolving credit facility.

(1) Adjusted net income, restaurant-level operating profit and restaurant-level operating margin are non-GAAP measures. For reconciliations of adjusted net income, restaurant-level operating profit and restaurant-level operating margin to the most directly comparable GAAP measures see the accompanying financial tables. For a discussion of why we consider adjusted net income, restaurant-level operating profit and restaurant-level operating margin useful, see “Non-GAAP Measures” below.

Steve Hislop, President and Chief Executive Officer of Chuy’s Holdings, Inc. stated, “Our second quarter results demonstrated continued sales recovery in our restaurants, despite operating under capacity restrictions for most of the quarter. We successfully grew our top line by over 64%, further narrowed our comparable sales gap from 2019, and improved our restaurant-level profitability, both on a dollar and margin basis. As we return to more normalized operations and increase our dining room capacity to 100%, we will ensure that our restaurants are properly staffed and continue to execute on the three key pillars that have resonated well with our guests throughout the pandemic – Safety, Convenience, and Value.”

Hislop continued, “The COVID-19 pandemic gave us an opportunity to reset our business model with continuing restaurant-level operating margin improvement. With positive sales trajectory and improved operating efficiencies, we are optimistic about the health of our business, and we will remain operationally and hospitality focused as we look toward the remainder of the year.”

Business Update

Comparable restaurant sales, average weekly sales per restaurant and off-premise sales as a percentage of total revenue for the second quarter and the third quarter to-date of 2021 are as follows:

Q2 2021

July

Comparable Restaurant Sales over 2020

60.0%

31.7%

Comparable Restaurant Sales over 2019

(1.4)%

(1.7)%

Average Weekly Sales per Restaurant

$87,969

$86,707

Off-premise sales as % of total revenue

27.0%

23.6%

During the second quarter of 2021, the Company continued to relax indoor dining capacity restrictions throughout its restaurants. As of August 5, 2021, all restaurants were operating without restriction. July comparable restaurant sales as compared to 2019 were negatively impacted by the unfavorable timing of Independence Day in 2021.

Second Quarter 2021 Financial Results

Revenue increased 64.7% to $108.2 million in the second quarter of 2021 compared to $65.7 million in the second quarter of 2020. The increase was primarily related to growth in customer traffic as the Company continued to relax indoor dining capacity restrictions throughout its restaurants, as well as $3.0 million of incremental revenue from new restaurants opened during fiscal year 2021. For the second quarter of 2021, off-premise sales were approximately 27% of total revenue compared to approximately 61% and 13% in the same period last year and two years ago, respectively.

Comparable restaurant sales increased 60.0% for the thirteen weeks ended June 27, 2021 compared to the thirteen weeks ended June 28, 2020. The increase in comparable restaurant sales was primarily driven by a 55.2% increase in average weekly customers and a 4.8% increase in average check. Comparable restaurant sales decreased 1.4% as compared to the same period in fiscal 2019.

Total restaurant operating costs as a percentage of revenue improved to 74.4% in the second quarter of 2021 from 77.5% in the second quarter of 2020 primarily driven by the following:

  • Cost of sales increased 10 basis points, primarily as a result of overall commodity inflation of 5.0%, partially offset by favorable mix driven by a decrease in fajita family kits sold as compared to the second quarter of 2020.
  • Labor costs increased 160 basis points, largely as a result of increased hourly and management labor as the Company reopened all of its dining rooms and reinstated the temporarily reduced manager salaries. The Company also incurred $0.8 million of incremental manager bonuses in conjunction with its $1.6 million manager retention program, with the remaining $0.8 million to be paid in the third quarter of fiscal 2021. Hourly labor rate inflation at comparable restaurants was approximately 1.3%.
  • Operating expenses improved 160 basis points as a result of decreases in delivery service charges and to-go supplies as the Company continued to relax indoor dining capacity restrictions, as well as sales leverage on fixed restaurant operating costs, partially offset by an increase in liquor taxes driven by higher bar sales mix as compared the same period last year.
  • Occupancy costs decreased 390 basis points primarily as a result of sales leverage on fixed occupancy expenses, partially offset by higher percentage rent and occupancy expenses related to three new stores opened during fiscal 2021.
  • Marketing expense increased 50 basis points as the Company reinstated its digital advertising campaigns across the nation.

General and administrative expenses were $6.7 million in the second quarter of 2021 compared to $4.8 million for the same period in fiscal 2020. The increase was primarily driven by lower expenses in 2020 due to the temporarily reduced salaries of corporate employees during the COVID-19 pandemic, as well as higher performance-based bonuses and travel expenses in fiscal year 2021. As a percentage of revenues, general and administrative expenses decreased 100 basis points to 6.3%.

Impairment, closed restaurant and other costs were $1.4 million ($1.1 million, net of tax or $0.05 per diluted share) during the second quarter of 2021. These costs included closed restaurants costs such as rent expense, utility and insurance costs required to maintain closed locations.

The Company recorded an income tax expense of $2.3 million in the second quarter of 2021 compared to a benefit $0.6 million during the same period in fiscal 2020. The increase in income tax benefit was driven by an increase in estimated annual net income.

As a result of the foregoing, net income increased 156% to $11.5 million, or $0.57 per diluted share, as compared to $4.5 million, or $0.26 per diluted share, in the second quarter of 2020.

Adjusted net income increased 215% to $12.6 million, or $0.62 per diluted share, in the second quarter of 2021 as compared to $4.0 million, or $0.23 per diluted share, in the second quarter of 2020. Please see the reconciliation of net income to adjusted net income in the accompanying financial tables.

Development Update

During the second quarter, two new restaurants were opened in Southport, Indiana and Amarillo, Texas.

2021 Outlook

Due to the ongoing uncertainty around the magnitude and duration of the COVID-19 pandemic, the Company is not in a position to provide full fiscal 2021 financial guidance, except the Company anticipates:

  • The opening of four new restaurants vs. four to six new restaurants.
  • Net capital expenditures (net of tenant improvement allowances) to be approximately $15 to $17 million vs. approximately $15 to $25 million.
  • Restaurant pre-opening expenses to be approximately $2 to $3 million.
  • An effective quarterly tax rate of approximately 16% to 18% for the remaining two quarters of fiscal year 2021.

About Chuy’s

Founded in Austin, Texas in 1982, Chuy’s owns and operates full-service restaurants across 17 states serving a distinct menu of authentic, made from scratch Tex-Mex inspired dishes.

Chuy’s Holdings, Inc.
Unaudited Condensed Consolidated Income Statements
(In thousands, except share and per share data)

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 27, 2021

June 28, 2020

June 27, 2021

June 28, 2020

Revenue

$

108,153

100.0

%

$

65,712

100.0

%

$

195,863

100.0

%

$

160,212

100.0

%

Costs and expenses:

Cost of sales

25,565

23.6

15,410

23.5

46,012

23.5

39,972

24.9

Labor

30,306

28.0

17,337

26.4

55,135

28.1

50,917

31.8

Operating

15,944

14.7

10,720

16.3

29,415

15.0

25,305

15.8

Occupancy

7,459

6.9

7,097

10.8

14,698

7.5

15,083

9.4

General and administrative

6,679

6.3

4,774

7.3

13,527

6.9

10,494

6.6

Marketing

1,238

1.1

365

0.6

2,215

1.1

1,374

0.9

Restaurant pre-opening

615

0.6

278

0.4

1,292

0.7

1,138

0.7

Impairment, closed restaurant and other costs

1,404

1.3

1,782

2.7

3,748

1.9

20,555

12.8

Gain on insurance settlements

(1,000)

(1.5)

(1,000)

(0.6)

Depreciation

5,086

4.7

4,895

7.3

10,004

5.2

10,184

6.3

Total costs and expenses

94,296

87.2

61,658

93.8

176,046

89.9

174,022

108.6

Income (loss) from operations

13,857

12.8

4,054

6.2

19,817

10.1

(13,810)

(8.6)

Interest expense, net

21

153

0.3

44

205

0.1

Income (loss) before income taxes

13,836

12.8

3,901

5.9

19,773

10.1

(14,015)

(8.7)

Income tax expense (benefit)

2,306

2.1

(601)

(1.0)

1,589

0.8

(6,113)

(3.8)

Net income (loss)

$

11,530

10.7

%

$

4,502

6.9

%

$

18,184

9.3

%

$

(7,902)

(4.9)

%

Net income (loss) per common share: Basic

$

0.58

$

0.26

$

0.92

$

(0.46)

Net income (loss) per common share: Diluted

$

0.57

$

0.26

$

0.90

$

(0.46)

Weighted-average shares outstanding: Basic

19,980,513

17,555,506

19,866,721

17,095,422

Weighted-average shares outstanding: Diluted

20,197,574

17,578,129

20,165,155

17,095,422

Reconciliation of GAAP net income (loss) and net income (loss) per share to adjusted results
(Unaudited, in thousands except share and per share data)

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 27, 2021

June 28, 2020

June 27, 2021

June 28, 2020

Net income (loss) as reported

$

11,530

$

4,502

$

18,184

$

(7,902)

Impairment, closed restaurant and other costs

1,404

1,782

3,748

20,555

Gain on insurance settlements

(1,000)

(1,000)

Income tax effect on adjustments (1)

(324)

(183)

(864)

(4,570)

Deferred tax revaluation adjustment (2)

(1,103)

$

(1,636)

Adjusted net income

$

12,610

$

3,998

$

21,068

$

5,447

Adjusted net income per common share: Basic

$

0.63

$

0.23

$

1.06

$

0.32

Adjusted net income per common share: Diluted

$

0.62

$

0.23

$

1.04

$

0.32

Weighted-average shares outstanding: Basic

19,980,513

17,555,506

19,866,721

17,095,422

Weighted-average shares outstanding: Diluted

20,197,574

17,578,129

20,165,155

17,095,422

(1) Reflects the tax expense associated with the adjustments for impairment, closed restaurant and other costs and gain on insurance settlements for the thirteen and twenty-six weeks ended June 27, 2021 and June 28, 2020. The Company uses its statutory rate to calculate the tax effect on adjustments.
(2) Reflects the tax benefit recorded during the thirteen and twenty-six weeks ended June 28, 2020 associated with the CARES Act administrative correction of the depreciation recovery period for qualified improvement property.

Reconciliation of GAAP income (loss) from operations to restaurant-level operating profit
(Unaudited, in thousands)

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 27, 2021

June 28, 2020

June 27, 2021

June 28, 2020

Income (loss) from operations as reported

$

13,857

$

4,054

$

19,817

$

(13,810)

General and administrative

6,679

4,774

13,527

10,494

Restaurant pre-opening expenses

615

278

1,292

1,138

Legal settlement

Impairment, closed restaurant and other costs

1,404

1,782

3,748

20,555

Gain on insurance settlements

(1,000)

(1,000)

Depreciation

5,086

4,895

10,004

10,184

Restaurant-level operating profit

$

27,641

$

14,783

$

48,388

$

27,561

Restaurant-level operating margin (1)

25.6

%

22.5

%

24.7

%

17.2

%

(1) Restaurant-level operating margin is calculated by dividing restaurant-level operating profit by revenue.

Chuy’s Holdings, Inc.
Unaudited Selected Balance Sheet Data
(In thousands)

June 27, 2021

December 27, 2020

Cash and cash equivalents

$

113,547

$

86,817

Total assets

515,905

493,675

Long-term debt

Total stockholders’ equity

263,339

241,858